Lakeland Financial Corporation · NASDAQ:LKFN
Lakeland Financial — Q2 2024 Earnings Presentation
61 slides from Lakeland Financial's earnings presentation, 2024
Slide 1: A Proven History of Shareholder Value Creation
Lakeland Financial Corporation A Proven History of Shareholder Value Creation And Commitment to Our Communities 2nd Quarter 2024 LKFN LISTED
Slide 2: Executive Contacts
David M. Findlay Chairman & Chief Executive Officer david.findlay@lakecitybank.com (574) 267-9197 Kristin L. Pruitt President kristin.pruitt@lakecitybank.com (574) 371-9220 Lisa M. O’Neill Executive Vice President & Chief Financial Officer lisa.oneill@lakecitybank.com (574) 267-9125 2
Slide 3: Forward-Looking Information
Forward-Looking Information This presentation contains, and future oral and written statements of the Company and its management may contain, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not historical facts and
Slide 4: Long Term Success for Shareholders
Long Term Success for Shareholders 5 Institutions (including LKFN) LTM ROE >13% LTM ROE >13% 20-Year TBVPS 12 Institutions CAGR >8%(3) 158 Institutions Profitable for the Last 10 Years(2) 191 Institutions Exchange Traded Depositories with Assets Between $1B and $10B(1) Source: S&P Capital IQ Pro. Fi
Slide 5: Strong Capital Structure
Strong Capital Structure Tangible Book Value(1) Per Share Allowance for Credit $31.95* Losses $35.00 8.1% $25.34 $30.00 Tangible Common Equity $25.00 91.9% $20.00 Key Ratios and Per Share Data as of $15.00 June 30, 2024 TCE/Tangible Assets 9.91% $10.00 Adj. TCE/Adj. Tangible Assets 12.18% Total Risk
Slide 6: Lake City Bank Today
Lake City Bank Today • A long-term and consistent organic growth story • Headquartered in Warsaw, Indiana • 53 branch offices - $6.6 billion banking assets - $3.4 billion trust, retirement and investment brokerage assets • Focused on execution – “blocking and tackling” • Continued growth potential 6
Slide 7: 32 Years of Organic Growth
32 Years of Organic Growth Record Net Income for 32 of 35 Years (000’s) $120,000 $93,767 $100,000 Compound Annual Growth 1991 – 2023 • Loans = 11% • Deposits = 10% $80,000 • Net Income = 12% • Earnings Per Share = 12% $60,000 $40,000 $2,707 $20,000 $0 1996 2022 1991 1992 1993 1994 1995 1997 1998 199
Slide 8: Established Market Presence
Established Market Presence Organic Growth Potential in Mature and Expanding Markets 8
Slide 9: A Continued Path to Economic Growth
A Continued Path to Economic Growth • 67% of Lake City Bank counties are growth and high growth counties • 40% of Lake City Bank counties are high growth counties • Indiana is poised to experience continued economic strength and vitality 9
Slide 10: Strong Regional and Statewide Economy
Strong Regional and Statewide Economy Unemployment Rate In The Lake City Bank Footprint Is Consistent With The National Average 14.0% 13.0% 12.0% Unemployment 10.0% 8.7% 8.0% 7.9% 7.3% 11.9% 6.0% 6.1% 5.8% 8.7% 5.3% 8.0% 7.8% 4.0% 4.5% 4.1% 5.9% 3.7% 3.6% 4.9% 3.4% 3.4% 3.4% 4.2% 4.0% 3.9% 3.4% 3.2%
Slide 11: Lake City Bank Balance Sheet Dynamics
Lake City Bank Balance Sheet Dynamics 1. Capital Strength 2. Diversified Deposit Composition 3. Liquidity Availability 4. Investment Securities Portfolio 5. Asset Liability Management 11
Slide 12: Fortress Balance Sheet in Excess of Regulatory Capital Requirements
Fortress Balance Sheet in Excess of Regulatory Capital Requirements LKFN Above Peer Long-Term Profitability has Contributed to a Strong Capital Foundation Proxy Peer Average RBC Q1’24 14.9% 16.0% 15.5% 15.0% 14.0% 13.3% 13.0% 12.0% 11.0% Well Capitalized Threshold 10.0% for Consolidated Risk-Based C
Slide 13: Deposit Composition Provides Diversification
Deposit Composition Provides Diversification Commercial Deposits Increase Share of Total Deposits Brokered Brokered Deposits Deposits $161,040 $113,528 3% 3% Total Commercial Total Total Retail $1,276,047 Commercial $1,724,777 31% Total Retail $2,150,127 30% 37% $1,617,133 39% Total Public Total Pub
Slide 14: Diversified Deposit Base
Diversified Deposit Base Deposits Are Not Concentrated to Any Industry or Client • Deposit composition has remained stable with commercial deposits increasing as a percent of total deposits • Lake City Bank had 119,409 deposit accounts at June 30, 2024. 117,004, or 98%, of those accounts are less th
Slide 15: Checking Account Trends by Deposit Sector
Checking Accounting Trends by Deposit Sector Commercial Accounts Grow by 21% since December 2019 (000) Checking Account Average Balances $2,500,000 by Deposit Type (000) Public Commercial Retail Funds $2,000,000 $2,105,411 06/30/24 $130 $15 $6,192 $2,079,407 $2,019,043 $1,953,969 12/31/23 $137 $15 $
Slide 16: Liquidity Overview
Liquidity Overview • Available liquidity is stable at $3.3 billion, up from $2.9 billion at June 30, 2023 • Sources of liquidity are varied and represent wholesale funding and brokered deposits • Brokered deposits represent 3% of total deposits • Noncore funding represented 4% of total deposits and
Slide 17: Projected Impact of Rising/Falling Rates
Projected Impact of Rising/Falling Rates Asset Sensitive Balance Sheet Continues Neutral Shift 4.00% 2.00% 0.05% 0.06% 0.08% 0.08% 0.09% 0.00% -0.20% -0.08% -0.50% -1.32% -2.00% -2.23% -4.00% NII - Rates NII - Rates NII - Rates NII - Rates NII - Rates NII - Rates NII - Rates NII - Rates NII - Rates
Slide 18: Evolution of Deposit and Loan Betas
Evolution of Deposit and Loan Betas Deposit Mix Shift Has Slowed • NIM compressed by 2 basis points from 1Q24 to 2Q24 • Noninterest bearing deposits represent 21% of total deposits at June 30, 2024 compared to 27% at June 30, 2023 and 24% at December 31, 2023 • Total cumulative deposit beta of 54% f
Slide 19: Interest Rate Sensitivity
Interest Rate Sensitivity Asset Sensitivity Decreased Due to Shift to Shorter Term Funding • Asset sensitivity impacted by shift to FHLB/Other interest-bearing transaction and $566,068 short-term time deposit accounts 13% • Approximately $650.0 million of fixed Fixed Rate rate commercial loans are e
Slide 20: Shareholder Value Strategy
Shareholder Value Strategy 1. Commercial Banking Focus 2. High Quality Team Members 3. Proven Organic Growth Experience 4. Focus on Core Deposit Funding 5. Commitment to Technology 20
Slide 21: Commercial Banking Focus
Commercial Banking Focus Experienced Relationship Driven Team • 42 credit “smart” commercial bankers • Average 24 years in banking & 13 years at Lake City Bank • We live where we lend • Face to face calling matters and is a team effort • We understand our clients’ needs • Deep organizational structu
Slide 22: Credit Process
Credit Process Commercial Banking Focus • Our credit discipline has never changed • We have a centralized committee structure • We are in-market lender to in-market clients • Character matters – we lend to people first • We focus on management/cash flow • Structure is important and is disciplined •
Slide 23: Corporate Social Responsibility
Corporate Social Responsibility Over 150 Years of Focusing on Our Customers, Employees and Our Communities • Supporting our communities since 1872 • Caring for and building a diverse and inclusive team • Delivering customer-focused loan and deposit products to our communities • Developing strong cyb
Slide 24: Lake City Bank Culture
Lake City Bank Culture High Quality Team Members • Our culture is our greatest asset and we will preserve it • Lake City University drives our culture • Diversity, Equity and Inclusion are ongoing initiatives that create a culture of belonging • Our community involvement is real and critical to our
Slide 25: Mature Market Deposit Performance
Mature1 Market Deposit Performance Organic Growth 2013 – 2023 $3,000 $2,631 $2,419 $2,500 Lake City Bank has grown $1,975 deposits by 100% over the $2,000 $1,500 last ten-year period. $1,000 $500 $483 $459 $417 $359 $221 $0 -$500 -$300 -$1,000 -$1,500 -$1,472 -$2,000 1st Source Lake City Bank JPM Ch
Slide 26: Expansion and Innovation Occurring Throughout Indiana
Expansion and Innovation Occurring Throughout Indiana • Indiana #1 manufacturing state in the country(1) • Indiana received tech hub designations from the federal government in microelectronics, hydrogen energy and biotechnology.(2) • Electric Vehicle battery plant planned in St. Joseph County (Sout
Slide 27: Commitment to Technology
Commitment to Technology Innovation and Competitive Technology is a Focus • Fintech partnerships play a significant role in our technology stack and enable delivery of innovative solutions to our customers • Investments in Lake City Bank Digital, a Q2 product implemented in 2021 with ongoing functio
Slide 28: Channel Utilization Today versus Pre-Pandemic
Channel Utilization Today versus Pre-Pandemic Mobile Adoption Outpacing All Other Delivery Channels Total Total Channel Transactions % of Transactions % of Period Type 2019(1) Total 2024(1) Total Change Branch Transactions 2,279,975 18% 2,046,992 14% (10)% ATM/ITM 944,785 7% 781,251 6% (17)% Online
Slide 29: Customer Composition and Digital Adoption
Customer Composition and Digital Adoption Digital Platform Upgrade with Fintech Partner in 2021 Positively Impacting Digital Adoption Across All Generations Customer Composition and Digital Adoption Over Three Years Customer Generation(1) Breakdown 6/30/24 6/30/23 6/30/22 Gen Alpha (2010 - Current)
Slide 30: Financial Performance
Qoake City Bank Financial Performance
Slide 31: Income Performance Metrics
Income Performance Metrics LKFN Performance Exceeds National Peers and Contributes to Strong Capital Levels ROAE and ROATE LTM Peer Average Data1 22.00% National Indiana ROAE 9.1% 10.5% 2.70% ROATE 10.8% 12.0% 20.00% 17.52% 18.00% 16.03% 15.57% 17.40% 14.48% 16.00% 2.20% 14.27% ROAE and ROATE 13.59%
Slide 32: Net Income and EPS
Net Income and EPS Net Income Improves in 2024 $103,817 $4.50 $101,575 $100,000 $95,733 $93,767 $4.00 $87,047 $84,337 $4.04 $3.95 $3.74 $3.50 $80,000 $3.65 $3.38 $3.30 $3.00 Net Income $60,000 $2.50 EPS $45,950 $38,889 $40,000 $2.00 $1.78 $1.50 $20,000 $1.51 $1.00 $0 $0.50 2019 2020 2021 2022 2023 2
Slide 33: Pretax Pre-Provision Earnings
Pretax Pre-Provision Earnings Pretax Pre-Provision Earnings Improves in 2024 $160,000 6.00% $140,000 $134,539 $126,544 5.00% Pretax Pre-Provision Earnings/Average Assets $118,646 $118,521 $116,183 $120,000 $110,620 Pretax Pre-Provision Earnings 4.00% $100,000 $80,000 3.00% $64,725 $60,000 $49,690 2.
Slide 34: Average Loans
Average Loans Average YTD Loan Growth of $241 million or 5% Compared to Prior Year $6,000,000 120% $5,002,935 $5,000,000 $4,813,678 110% $4,424,472 $4,421,094 $4,427,166 $3,974,532 $4,000,000 100% Loans to Deposit Ratio 94% 95% 90% $3,000,000 Loans 86% 87% 80% 83% $2,000,000 77% 70% $1,000,000 60% $
Slide 35: Line of Credit Utilization
25% 35% 55% 65% 75% 85% 95% 45% $1,669 $1,738 3,407 $1,630 $1,785 3,416 49% 48% $1,593 $1,835 3,429 46% PPP Round 1 $1,637 $1,785 3,423 48% $1,473 $2,066 3,539 $1,446 $2,109 3,554 PPP Round 2 $1,499 $2,044 3,544 42% 41% 42% $1,410 $2,190 3,600 $1,494 $2,206 3,700 39% 40% $1,553 $2,243 3,795 $1,690 $
Slide 36: Commercial DDA
Line of Credit Utilization 30% 35% 40% 45% 50% 55% 60% Dec-13 $389,051 50% Dec-14 $467,458 51% Dec-15 $572,966 50% Dec-16 $660,360 52% Dec-17 $740,576 54% Dec-18 $775,947 49% Mar-19 $761,686 47% Commercial DDA Jun-19 $772,995 49% Sep-19 $849,092 48% Dec-19 $814,430 46% PPP Round 1 Mar-20 $883,956 48
Slide 37: Loan Portfolio Breakdown
Loan Portfolio Breakdown C&I Drives Lending Business Agri-business - Other Residential Commercial RE - Agriculture Commercial Mortgage Construction $361,064 $96,703 $259,094 $658,345 7% 2% 5% 13% Home Equity $197,861 4% Commercial RE - Multifamily Installment - Other $252,652 Consumer 5% $110,847 2%
Slide 38: Top 10 Industry Concentrations
Top 10 Industry Concentrations Loan Portfolio is Diversified Nonbank Lenders Restaurants Automobile Dealers $120,347 $115,052 $131,162 2% Hotels 2% 3% $106,834 2% Senior Living $135,806 3% Misc. Durable Goods Merchant Wholesalers $106,078 RV Industry 2% $191,239 4% Multifamily Housing Industrial CRE
Slide 39: Average Deposits
Average Deposits Average YTD Deposit Growth of $206 million or 4% Compared to Prior Year (000’s) 150% $6,000,000 $5,717,358 $5,604,228 $5,725,196 140% $5,357,284 130% $5,000,000 $4,650,597 Deposits as a Percent of Total Funding $4,242,524 120% $4,000,000 110% Deposits 100% $3,000,000 98% 98% 99% 100
Slide 40: Deposit Breakdown
Deposit Breakdown Deposit Costs Rise in Response to Interest Rate Environment and Increased Competition Brokered Deposits Cost of Deposits 3.00% 3.00% 2.46% $161,040 3% 2.00% 1.19% 1.35% 0.98% 1.10% 1.00% 0.63%0.48%0.50%0.54% 0.72% 0.63% 0.63% 0.28% 0.00% 2011 2012 2013 2014 2015 2016 2017 2018 2019
Slide 41: Public Fund Deposit Trends
$100,000 $300,000 $500,000 $700,000 $900,000 -$100,000 $1,300,000 $1,500,000 $1,700,000 $1,100,000 $1,225,127 $1,250,576 $1,215,533 $1,211,148 $1,253,704 Checking and MMA $1,281,451 $1,127,111 $1,132,438 $1,103,014 $1,212,131 CDs $1,162,457 $1,204,153 $1,275,388 $1,289,603 $1,284,641 $1,340,566 $1,4
Slide 42: Net Interest Income
Net Interest Income Decline in Net Interest Margin Offsets Impact of Loan and Deposit Growth (000’s) $250,000 4.50% $202,887 Net Interest Margin, fully tax equivalent $197,035 $200,000 $178,088 Net Interest Income $163,008 $155,047 4.00% $150,000 3.38% 3.40% $100,043 3.50% 3.31% $95,712 $100,000 3.1
Slide 43: Asset Quality: Nonperforming Assets
Asset Quality Nonperforming Loans Rise Due Primarily to a Single Commercial Credit 5.00% 14.00% 4.00% Watch List Loans to Total Loans excluding PPP 12.00% Nonperforming Assets to Total Assets 3.00% 8.86% 10.00% 8.17% 8.06% 7.46% 8.00% 2.00% 6.64% 6.75% 5.75% 5.50% 5.31% 6.00% 4.64% 4.77% 4.28% 4.50%
Slide 44: Asset Quality: Allowance for Credit Losses
Asset Quality Allowance for Credit Losses Represents Strong Coverage 0.60% 2.70% 2.39% 2.28% 2.40% 0.50% ACL to Total Loans, excluding PPP 2.15% 2.10% Net Chargeoffs to Average Loans 1.92% 0.40% 1.67% 1.80% 1.59% 1.59% 1.60% 1.54% 1.42% 1.45% 1.46% 0.30% 1.50% 1.26% 1.23% 1.24% 1.25% 0.20% 1.20% 0.9
Slide 45: Noninterest Income
Noninterest Income Noninterest Income Includes $9.0 million in Visa Stock Net Gain (000’s) $60,000 60% Non-Interest Income as % of Total Revenue $49,858 $50,000 $46,843 50% $44,997 $44,720 $41,862 Non-Interest Income $40,000 40% $33,051 $30,000 30% $21,815 $20,000 26% 20% 22% 22% 20% 20% 17% 18% $10
Slide 46: Total Revenue
Total Revenue Revenue Growth Benefited by Loan Growth and Improvement in Noninterest Income (000’s) $300,000 $246,893 $244,749 $250,000 $222,808 $209,851 $200,044 $200,000 $150,000 $128,763 $121,858 $100,000 $50,000 $0 2019 2020 2021 2022 2023 YTD 2023 YTD 2024 Compound annual growth rate “CAGR” is
Slide 47: Non-Interest Expense
Non-Interest Expense Disciplined Investment in People and Technology Continues (000’s) $140,000 $130,710 $120,000 $110,210 $114,049 $104,287 $100,000 $89,424 $91,205 $80,000 $72,168 $64,038 $60,000 $40,000 $20,000 $0 2019 2020 2021 2022 2023 2023 Adj. YTD 2023 YTD 2024 (1) 12023 Year-to-date noninte
Slide 48: Efficiency Ratio
Efficiency Ratio Efficiency Ratio Normalizing in 2024 70% Constant investment in technology and facilities 60% 52% 53% 51% 50% 50% 48% 47% 50% 46% 45% 45% 45% 43% 50% 40% 47% 30% 20% 10% 0% 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 YTD 12023 Year-to-date adjusted core efficiency ra
Slide 49: Stable Healthy Dividend
Stable Healthy Dividend Growth in Dividend Reflects Strength of Capital 5.00% $1.90 $1.84 4.50% $1.70 $1.60 $1.50 4.00% $1.36 Dividend per Share $1.30 3.50% Dividend Yield $1.16 $1.20 $1.10 2.82% $0.96 3.00% $0.92 $0.90 2.40% 2.24% 2.19% 2.50% $0.70 1.70% 2.00% $0.50 $0.30 1.50% $0.10 1.00% 2019 202
Slide 50: LKFN Shareholder Value
LKFN Shareholder Value Total Return Performance from 12/31/00 to 6/30/24 3,500.00 3,000.00 2,611.41% 2,500.00 2,000.00 1,500.00 1,000.00 548.06% 500.00 184.86% 182.60% 0.00 (500.00) 2016 2018 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2017 2019 2020 2021 2022 202
Slide 51: Investment Highlights
Investment Highlights • Proven History of Organic Growth • Disciplined and Focused Strategy • Strong Internal Culture • Consistent Execution • Service Excellence Drives Shareholder Value 51
Slide 52: Supplemental Information
Supplemental Information Qoake City Bank
Slide 53: Lake City Bank Capital Adequacy
Lake City Bank Capital Adequacy Capital Strength Continues in June 2024 Non-GAAP Non-GAAP Non-GAAP Adjusted June 30, Well- Capital AOCI and Excess Capital Regulatory Ratio 2024 Capitalized Cushion HTM Capital Ratios with Description * Actual Threshold (in 000’s) Losses- after AOCI AOCI and after tax
Slide 54: Liquidity Preparedness
Liquidity Preparedness June 30, 2024 Additional Loan Collateral Liquidity Available for (000) Availability Used Unused/ Available Pledge Secured/Committed Borrowings: Federal Home Loan Bank-Indianapolis(1) $ 572,370 $ 0 $ 572,370 $ -- Federal Reserve Bank Discount Window 1,194,369 -- 1,194,369 268,8
Slide 55: Investment Portfolio
Investment Portfolio Recurring Cash Flows Used to Fund Organic Loan Growth 25% US Govt Remics 20% 21% 8% MV Investments as a % of Assets 20% 18% US Govt US Govt 15% 17% Agencies Pools 10% 30% 13% 14% 10% 12% 12% 12% 12% 5% HTM Municipals 0% 10% AFS 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 M
Slide 56: Investment Security Portfolio Cashflows
(000) 10,000,000 15,000,000 20,000,000 25,000,000 30,000,000 35,000,000 5,000,000 - 18,453,709 8,626,632 17,775,072 7,527,521 15,640,232 8,424,700 17,415,459 7,345,652 17,470,675 8,248,473 Principal 16,523,243 7,156,142 through June 2024 $248 million in cash flow and 14,571,556 8,069,521 proceeds fr
Slide 57: Investment Portfolio Analysis
Investment Portfolio Analysis Investment Portfolio as a Percentage of Total Assets Continues to Decline 6/30/2024 12/31/2023 Weighted Market % of Weighted Market % of Maturity Value Total Maturity Value Total US Govt REMICS 6.13 91,016 8% 6.28 98,265 8% US Govt Pools 7.41 328,214 30% 7.44 349,577 30
Slide 58: Commercial Loans by County
Commercial Loans by County Commercial Customers in 49 Indiana Counties and 21 Other States Other IN Marshall Counties (1) 3% 17% Outside IN 6% Marion 14% Allen 18% Hamilton 9% Commercial Loans Kosciusko Outstanding as of 10% Elkhart 6/30/2024 St. Joseph 14% $4.5 billion 9% June 30, 2024 (000’s) (1)
Slide 59: Larger Market Organic Expansion
Larger Market Organic Expansion Organic Growth State LCB LCB Deposit Rank County Primary City Population* Entry Market Share** # of Branches 21. Kosciusko Warsaw 80,826 1872 64% 12 6. Elkhart Elkhart 206,890 1990 23% 11 5. St. Joseph South Bend 272,234 1997 8% 4 3. Allen Fort Wayne 391,449 1999 12%
Slide 60: Mature Market Strength and Growth
Mature Market Strength and Growth Organic Growth (millions)1 2023 2013 2023 # of Deposits Share Deposits Share Increase Offices 1. 1st Source $5,258 19.69% $2,627 14.33% 100.15% 53 2. Lake City Bank $4,828 18.08% $2,409 13.14% 100.42% 53 3. JPM Chase $3,651 13.68% $1,676 9.14% 117.84% 20 4. PNC $1,6
Slide 61: Lake City Bank
Qiake City Bank LAKECITYBANK.COM